Stakeholders say ‘two-pronged’ approach, that increases transparency and puts a cap on underlying costs, is way to go

Assembly Speaker Craig Coughlin

After wrestling for close to a decade with the contentious issue, New Jersey lawmakers are ready to once again tackle the question of what to do about out-of-network medical bills — and this time the goal line may be closer in sight.

The Assembly Financial Institutions and Insurance Committee heard familiar comments Monday from groups representing patients, business interests, physicians, hospitals, and insurance providers — stakeholders that have long played key roles in the debate over these charges, which contribute to the rising cost of healthcare overall.

The issue concerns unexpected charges — also known as surprise bills — from doctors or hospitals that are not part of a patient’s insurance coverage plan, which involve treatments offered at a higher cost because the providers are not part of a negotiated contract. In some cases the bills come from specialists, like anesthesiologists or radiologists, who are associated with an in-network hospital, but not part of an individual’s in-network coverage.

Monday’s testimony was not focused on any particular bill, but the panel’s chairman, Assemblyman John McKeon (D-Morris), said the committee will reconvene next week to discuss the latest version of out-of-network legislation. Democratic Gov. Phil Murphy has also prioritized this concern, which advocates said added at least $1 billion to the taxpayers’ tab for insuring state workers last year.

Impact on state budget

“Ultimately these cost affect every New Jersey taxpayer, because of their impact on the state budget,” explained Mary Beaumont with the New Jersey Business and Industry Association, a leader in the campaign for reform. “They also have a substantial impact on the cost of doing business in New Jersey.”

While similar to plans proposed in the past, a measure (A-2039) was introduced recently by sponsor Assemblyman Craig Coughlin — the new Assembly speaker — and key members of the Financial Institutions committee, which boosts its chances politically. It contains small but important changes that make it increasingly palatable to hospitals, a powerful voice in what was one of the most heavily lobbied topics in recent years.

The key stakeholders — largely represented in Monday’s testimony— agree that any solution requires measures designed to increase transparency for consumers, so patients are clear on what is covered under their plans and what treatments cost. But patients, businesses, and insurance providers say a “two-pronged” response is the true answer, one that increases transparency but also addresses the underlying costs associated with providers that are not part of a network.

The issue has been debated in the state legislature for years and has been a priority for patient groups; it was also the focus of an NJ Spotlight Roundtable in February last year. Fierce debate last year resulted in significant discussion and a number of amendments to the legislation, but the issue was among those derailed by the budget debate.

168,000 NJ residents receive surprise bills annually

Advocates for healthcare consumers point out that some 168,000 Garden State residents receive some form of surprise medical bill annually. While New Jersey law protects most patients from paying extra, the cost is passed on to insurance companies, which leads to increases in premiums. That drives up the cost for individuals and businesses, who already struggling to keep pace with the rising cost of providing coverage for their workers

Hospitals and physicians add another perspective, noting that a handful of outlier facilities with extremely high costs are distorting the debate. Providers spend a significant amount of time battling insurance companies for legitimate reimbursements, they add, and patients are often surprised to learn how little their policies actually cover.

Larry Downs, the president of the Medical Society of New Jersey, said physicians support legislation that requires providers to make clear what they charge and who is in-network, and forces insurance companies to break down in simple terms what services are covered.

“The missing piece to the puzzle in our eyes is transparency,” Downs said. “Yet we’ve held that vital consumer-friendly transparency issue hostage while we fight about how to adjudicate that small number of claims.”

Representatives of the New Jersey Hospital Association said facilities here spend $15 million annually protesting insurance cases, two-thirds of which end up in their favor. They have also gone to a number of lengths to help patients avoid unexpected costs, with online tools that help consumers compare provider prices and assess their coverage.

Transparency not enough

“Our goal is higher value care. The highest quality at the lowest cost,” said NJHA president Cathleen Bennett, who served as state health commissioner until November.

But consumer and business groups said transparency alone is not enough — and health insurance companies agree. These groups believe more must be done to address the underlying costs involved in out-of-network charges, which are often many times what is billed for the same treatment by in-network providers.

“Transparency is a good thing, but it does not resolve the core problems,” said Ward Sanders, president and CEO of the New Jersey Association of Health Plans, which represents insurance companies. Sanders and others believe a true solution requires a two-pronged attack that provides more information for consumers, but also caps or otherwise controls the underlying costs — something this bill includes through an arbitration process.

The legislation outlines a number of disclosure requirements, designed to enable consumers to determine what services are available to them at what cost, and it requires insurance companies and healthcare providers to keep these directories updated. It maintains all the existing protections for patients and establishes a new arbitration system to resolve payment disputes between insurance companies and physicians.

Arbitration a sticking point

The question of arbitration has been a sticking point. The bill was amended to call for “baseball style” negotiation, in which a non-partial individual appointed by the state would help the two parties reach an agreement, based on their best final offers. This option is more appealing to hospitals, who had opposed a previous version that capped payments at a percentage of Medicare costs.

The measure also allows self-funded health insurance plans, which are not technically regulated by the state, to opt in to the protections. State insurance law traditionally applies to plans that cover roughly half the Garden State residents with insurance.

Maura Collinsgru, who leads the NJ For Health Care coalition — which includes the NJBIA — praised all parties for their efforts to come together over the past years. But she stressed for the committee that the status quo was not acceptable and the debate over the details, like arbitration, shouldn’t stand in the way of a larger win.

“We have been debating every word of this bill for the last two years. And we’ve made tremendous progress in closing the gaps between the stakeholders,” she said. “But it cannot stay that the provider and the payers can’t agree, so the consumers keep holding the ball.”